Life Of The Party

Retailer Of The Year 2011

His store doesn’€™t offer customers a frequent shopper program and doesn’€™t use traditional advertising. There’€™s little formal staff training; staff meetings are infrequent; there are no weekly specials. So, how did The Party Source, located in Bellevue, KY, become a $40 million business? Clearly, there are a lot of other successful retailing dynamics that make The Party Source one of the top beverage alcohol locations in the U.S.

But to hear Ken Lewis tell it, a citation from the state liquor board was one of the turning points in his journey from a 1,500 square-foot storefront in an ethnic area of Louisville, KY, to an 80,000 square-foot superstore just outside of Cincinnati.

‘€œWhen I started out in the business, the only things that really mattered were location and good social skills,’€ said Lewis, owner of The Party Source and a former English teacher. ‘€œI got my real business education working 12 to 14 hours a day talking to customers and liquor salesmen in my first store in Louisville.’€

Lewis went on to build his own 5,000 square-foot building complete with a drive-through window, but things really changed in 1975 when Kentucky ended fair trade liquor laws. Lewis wanted to emulate the emerging club store type of retail concept. He rented a 12,000 square-foot. former A&P grocery store, and applied for a new liquor license. The state Department of Alcohol Beverage Control (ABC) granted the license assuming Lewis only planned to use part of the space and sublet the rest.

‘€œWe were one of the few computerized retail businesses at the time,’€ Lewis said, ‘€œwhich was the only way to handle 6,000 SKUs. I managed every aspect of the business at the time, and accidentally marked some product below cost.’€

The ABC cited Lewis for the violation. When department representatives arrived to issue the citation, a reporter and photographer showed up. The resulting newspaper story and photo positioned Lewis as a pioneer, brave enough to sell below cost, rather than as a scofflaw.

Lewis continued to implement other radical notions in beverage alcohol retailing, first moving the business to northern Kentucky, opening The Party Source across the river from Ohio, still a control state. He oriented the store toward primary shoppers’€”women’€”another radical idea. Like grocery supermarkets, the store was big, bright and cheerful with clearly marked aisles and lots of products to choose from.

‘€œWe offered more services, better wine, food and supplies, and became a one-stop shopping experience,’€ Lewis said. ‘€œThe idea behind The Party Source was reflected in our motto, ‘€˜everything but the guests.’€™’€

Fairly quickly, Lewis opened more outlets, ending up with six stores in the area, each with between 40,000 and 60,000 square feet and about 50 employees.

Secret To Success

But success of that sort didn’€™t feel right to Lewis. ‘€œI was uncomfortable being the CEO of a company like that,’€ he said. ‘€œThe business was running me instead of me running the business.’€

Lewis slowly divested himself of five stores, selling three to the large Liquor Barn chain and two others to individuals. Left with the original Bellevue store, Lewis paid off all the company’€™s debt and went back to doing what he does best, running a hands-on, local business.

‘€œThe lovely thing about a small business is that it reflects your own values,’€ he said. ‘€œIn the hyper-competitive business of retailing in general, you have to broaden the definition of why you’€™re in business. It used to be only about making money, and there’€™s nothing wrong with that. But I take great pride in the fact that we have so many great career employees and really care about all those families. It’€™s part of the definition of our success.’€

‘€œOur values really are Ken’€™s values,’€ said Jon Stiles, general manager. ‘€œWe have a solid concept, good pricing, but it comes down to the people here. They have 10, 12, 18 years of experience. We have husbands and wives, mothers and daughters, families working here, and we have customers who shop here because they want to go through ‘€˜Debbie’€™s’€™ checkout line. It’€™s not all about the bottom line; it’€™s about relationships, a great shopping environment and an excellent place to work.’€

But the store and its staff aren’€™t too shabby when it comes to retailing, either. The store has been expanded over the years to its present size, a little less than half of which is inventory storage. Taking its cues from the grocery industry, The Party Source stocks more than 34,000 items in brightly lit, well-marked aisles. Departments are broken out much like a supermarket’€™s, too, making it easy for shoppers to find what they need.

‘€œIn terms of our brand,’€ Stiles said, ‘€œone concept that’€™s stood the test of time is one-stop shopping. Our customers’€™ expectations are very high that we’€™ll have what they need, from beverage alcohol to party supplies, and if we don’€™t have it, then we can get it, or at least find out where they can get it.’€

The store doesn’€™t offer a frequent shopper card, and doesn’€™t promote per se. ‘€œWe offer solid everyday prices,’€ Stiles said. ‘€œIf our costs go down, prices go down. If they go up, prices go up.’€

There are no weekly specials. Instead, featured items are displayed on end-caps or on the floor in the front of the store. Displays may feature as many as 180 or 200 cases of product, and the store relies on suppliers for signage and merchandising materials.

‘€œIf vendors earn a display spot we have high expectations,’€ Stiles said. ‘€œWe want them to keep it fresh. Customers appreciate the colorful mix of merchandising materials and displays, but we expect instant recognition of what a display communicates.’€

Traditional holiday displays are big, of course, but since the store is geared to parties, some themes, like Mardi Gras and luau, do well year-round. Other events the stores strongly caters to include the Kentucky Derby, Jimmy Buffet concerts (lots of Parrotheads in Cincinnati) and the Saturday before Thanksgiving’€”not just because of the holiday, but also due to the traditional Ohio State/Michigan football game the Saturday after Thanksgiving.

Bucking Tradition

In many ways, though, the store doesn’€™t adhere to tradition, forging a path best suited to its business model. It eschews traditional advertising, for example, preferring other means of communicating with customers.

‘€œWe did no ads in the early years,’€ Stiles said. ‘€œWe tried print and radio a few years ago, but couldn’€™t measure advertising’€™s impact so we moved away from it. We see a diminishing return from traditional media; we’€™ve even pulled our listing out of the Yellow Pages.’€

Instead, like a lot of businesses, The Party Source has concentrated on its digital presence in cyberspace. A comprehensive and well laid out website features what Stiles calls a ‘€œreally good ‘€˜drink-find’€™ search engine.’€

‘€œCustomers can search the site by brand, or even look for things like gluten-free beer,’€ he said.

The store maintains a complete inventory online. Customers can order whatever they like and pay for it on the website. Staff will pull the order and have it ready for pick-up whenever customers come to get it. (State law prohibits the store from shipping or making deliveries.)

Customers can sign up in-store or online for a bi-weekly e-newsletter that highlights new items, reviews products, offers staff recommendations and announces upcoming tastings and events. The store recognizes how much e-mail most people get and tries to be respectful of those who’€™ve signed up for e-mail communications. It sends out e-mail only when it has something to communicate, and provides information rather than hard-selling its audience.

‘€œWe’€™re out there on Facebook and Twitter now, too,’€ Stiles said, ‘€œand we’€™re working with a company in Wisconsin to help us with social media. Facebook is the world’€™s third largest country’€”you have to be out there’€”but it’€™s social media, so we keep our communication social. It’€™s not about the sale; it’€™s more about education, tastings, special products’€”the things people are interested in.

‘€œIt doesn’€™t do any good to place an ad that says we’€™re the best. We have to offer a reason that compels customers to act. Social media allows you to send out a lot of actionable messages.’€

Raising Customers’€™ EQ

And The Party Source does mean action. It lives up to its name, hosting a wide variety of events every week to keep its customers interested, educated, informed and entertained. Several years ago, Lewis and several staff members came up with the idea of a school offering culinary, mixology and entertaining classes. The school’€™s mission was and is to raise people’€™s Entertainment Quotient, so it was named EQ, and it opened for business in 2005.

‘€œFrom an educational standpoint, we don’€™t offer certification in anything,’€ said Amy Tobin, culinary director of the program, ‘€œjust recreational education. People are hungry for it.’€

From some cooking classes and wine tastings, though, EQ quickly became more than an adjunct to the core business. It’€™s now the store’€™s social hub, community outreach program and charitable giving arm. In essence, EQ is The Party Source’€™s persona brought to life.

‘€œWe have en event of some kind at least six days a week,’€ Tobin said, ‘€œand we cover so many topics there’€™s something for everyone.’€

Monday nights are a ‘€œTaste of’€¦’€ restaurant event, where local chefs come in to share bites of their menus with customers.

On Tuesday nights, the wine department offers tastings of whatever it deems special that week.

Wednesday nights, the staff puts on ‘€œBurgers & Beers,’€ giving customers a gourmet burger and flight of five beers for $15.

On Thursday, the store brings in a wine expert (often someone on staff) to guide customers through a wine tasting and food pairing. In the new year, the program will be expanded to include topics like best wines under $15 or best wines with barbecue.

Friday nights are a mixed bag. When the spirits department isn’€™t hosting a tasting, EQ will offer the occasional ‘€œGirls’€™ Night Out’€ to give the ladies entertaining and drink recipe tips, complete with pink or blue cocktail shakers and a sampling of frou-frou girlie drinks. Wine dinners also are a popular Friday night event.

Wine tastings are usually held on Saturdays, and Saturday nights are a potpourri of different events. EQ also offers lunchtime classes on everything from tailgate parties, Mediterranean food, and mini-burgers to holiday cookies and entertaining.

EQ’€™s class schedule and instructors are promoted online and through a quarterly brochure. Reservations (and class fees) are required in advance, strongly encouraging customers to make commitments to the events in which they’€™re interested, and helping staff plan in advance.

EQ also gives The Party Source a face in the Cincinnati area, and a means through which to give back to the community. Lewis has always been community minded, and EQ has raised even greater awareness of how involved the store is in community affairs. EQ and its staff are actively involved in a couple of Cincinnati’€™s largest fundraisers, ‘€œZoofari’€ for the city zoo, and ‘€œTaste of The World’€ for the Leukemia Society.

EQ also provides a chef and wine to the Krohn Conservatory’€™s annual fundraiser. Because the conservatory is a personal favorite, Amy Tobin hosts a series of events there for the public called, ‘€œAmy’€™s Table at The Krohn Conservatory.’€

Tobin, a celebrity on the Cincinnati food scene for many years [the host of the show, ‘€œAmy’€™s Table: A Girl’€™s Guide To Living,’€ as well the culinary director of EQ at The Party Source] offers her and her staff’€™s services for other charitable events as well, usually participating in about 30 a year. The store also donates gift baskets, wine, EQ classes and events and much more to charitable events throughout the year.

Not Afraid To Experiment

EQ is heavily subsidized because it provides so many benefits to the store. It also gives The Party Source a chance to try new things to see what works with customers and what’€™s good for business. The store is willing to experiment, which often leads to incremental sales.

‘€œThe cigar department is an example,’€ said Stiles. ‘€œWe started with a tiny humidor by one of the cash registers. Eventually, we built a hundred-square-foot humidor by the office, and cigar buying fell in my lap. We have a patio by the side of the building that wasn’€™t being used at night. I suggested holding a tasting, three for $15. Our first one drew five people, but we kept at it, every Tuesday night. Now we get up to 160 people, and our cigar sales are up to $2 million a year, making us the biggest cigar retailer in the area.’€

Though the shopping experience at The Party Source is more akin to a supermarket than a fine wine shop, about 25% of the store’€™s 12,000 transactions each week are the result of hand-selling. About 60 of the store’€™s 100 employees work the floor in shifts restocking shelves, answering questions, helping customers and offering recommendations.

Lewis estimates that the store’€™s volume is comprised of about 24% wine, 36% spirits, 14% beer, and the rest a combination of tobacco, food and party supplies.

The store keeps a perpetual inventory, so employees constantly restock throughout the day instead of waiting until the end of a shift or at night. The store’€™s POS system is tied directly into the inventory, so management has a running tab on what’€™s available in house, whether in storage, on the shelf or in a floor stack. If a stocker sees a hole somewhere, he or she flags it to find out why and see if the buyer needs to place a special order.

Lewis and the management team encourage employee education, but there’€™s no formal training program, very few staff meetings and no set schedule for tastings or product seminars.

‘€œWe don’€™t believe in meetings,’€ Stiles said. ‘€œWe get employees out on the floor dealing with customers and give them a fair amount of autonomy. This isn’€™t a company where Ken and I are off-site in an office somewhere. We’€™re here and available.’€

Many of the employees are old hands and know the ropes. When the store does hire new people, Stiles looks for people with passion for the job, especially if they have no experience. ‘€œThey can learn from the people who’€™ve been around, and soak up what they need to learn like a sponge,’€ he said.

He estimated that the staff tastes as many as 3,000 to 4,000 wines a year, but because there are so many employees, much of them are done one-on-one rather than trying to pull everyone together. But the company will bend over backwards to let people travel for education purposes if they want to learn more.

That kind of attitude about the people who keep The Party Source running smoothly contributes to the longevity of employees’€™ service.

‘€œThe great pleasure of being a small business owner,’€ Lewis said, ‘€œis the privilege of focusing on the day-to-day striving for excellence, and treating customers the way we would want to be treated. We have a good concept, we buy well and sell well, but it comes down to the fact that this is an honest business at every turn.’€

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